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  • Defined?: Applications, Enrollments, Starts - CECO Speak 0 comments
    Aug 8, 2013 4:52 PM | about stocks: CECO

    Scott Steffey CEO of CECO outlined his new enrollment reporting communication strategy in the Q2 2013 conference call with the following statement:

    "Let me just pause for a moment and let you all know about a nomenclature I make that I've -- a change that I'm making. In the past, the company has referred to enrolls in a way that I prefer to and refer to and use the term applicants. You will notice in the MDA of the 10-Q that where we had the term enrolls, I've put in, in parenthesis, applications or applicants. That's what I'm going to refer to on a going-forward basis instead of enrolls and what will the word enrollments is going to refer to new starts, and then total enrollments will refer to total population."

    This deserves some clarification for investment professionals who may not immediately know the difference between an "applicant", "enrollment", and a "Start".

    If a person who views an online ad clicks on that ad and asks for more information, this actually partially populates an application-for-admission form at a CECO institution. This might now be considered an "Applicant".

    In the past if that person completed the application form, including remitting application fees, that was considered an "Enrollment".

    A "Start" indicates that a student successfully participates in the 21 day readiness program by doing assigned coursework on time and earning passing grades.

    Steffey would contribute to clarity if he stated more clearly what an "Applicant" is. Is an applicant a person who has completed the entire enrollment process and has a "Start" date pending, or are applicants anyone who clicks on a form and enters any information?

    Total Student Population is the metric to watch. I would tend to discount "applicants" as this metric has been compromised.

    Students do not pay tuition until they have "started", until that point they are sunk cost.

    For a year's worth of quarterly reports the overall decline in student enrollments and student populations has been very steady and unabated. For the last 2 quarterly reports CFO, Colleen M. O'Sullivan, has iterated guidance that 2013's total student population would be an overall 2% decline from 2012. In actuality the decline has been and seems to be continuing toward around 25%. No such guidance was reaffirmed in this call.

    In fact the Q&A ended when Peter P. Appert - Piper Jaffray Companies, Research Division asked "... Is your expectation that starts for the company are going to be positive by the end of this year?"

    And Steffey replied "...I'm not forecasting anything. ..."

    At least we have an end to misleading statements from the CFO, but now we may have less clarity with the redefinition of the "applicants" metric.

    This matters because the continued trend will demand "strategic" measures very soon to maintain cash flow to meet regulatory financial requirements. In Steffey's formal closing remarks:

    "Lastly, I want to mention that we continue to evaluate our options to access capital understanding that maintaining a sufficient financial responsibility ratio with the Department of Education is critical as we continue our turnaround strategy."

    For those who have followed this stock closely, the Q2 2013 report was by all indications a confirmation of an institution in crisis.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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